DNP Select Income Fund Inc.: Navigating Distribution Strategy and Risk Management

DNP Select Income Fund Inc. (NYSE: DNP), a closed-end diversified investment management company, recently issued a Section 19(a) notice, providing insights into its distribution strategy and performance. This article delves into the Fund's distribution composition, the impact of return of capital, the managed distribution plan, and its primary investment objectives.

The Fund's total distribution of $0.065 per share for September 2024 is composed of various sources, with net investment income and capital gains contributing significantly. Net investment income accounted for 20% of the current distribution, amounting to $0.013 per share. Net realized long-term capital gains constituted the majority of the distribution, at 80% or $0.052 per share. Additionally, the Fund distributed $0.085 per share from return of capital (or other capital sources).

The return of capital distribution is crucial, as it indicates that the Fund has distributed more than its income and capital gains. This means that a portion of the distribution represents a return of the investor's initial investment, which may have tax implications. Investors should be aware that a return of capital does not necessarily reflect the Fund's investment performance.

The Fund's managed distribution plan aims to maintain a consistent distribution rate, which can provide shareholders with a stable income stream. However, it is essential to note that the distribution amount and terms do not necessarily reflect the Fund's investment performance. The Fund estimates that it has distributed more than its income and capital gains, which may impact the Fund's future performance and shareholder value.

DNP Select Income Fund Inc.'s primary investment objectives are current income and long-term growth of income. The Fund seeks to achieve these objectives by investing primarily in a diversified portfolio of equity and fixed income securities of companies in the public utilities industry. The Fund's distribution strategy aligns with its investment objectives, as it focuses on providing shareholders with a consistent income stream while aiming for long-term growth.



In conclusion, DNP Select Income Fund Inc. offers investors a diversified investment option with a focus on current income and long-term growth. The Fund's distribution strategy is supported by a mix of net investment income, capital gains, and return of capital. While the managed distribution plan provides shareholders with a stable income stream, investors should be aware of the potential tax implications and the impact on future performance. The Fund's primary investment objectives and distribution strategy make it an attractive option for income-oriented investors seeking exposure to the public utilities industry.